Launch list • 1. Have your “buy vs. rent” HW out on your desk.
1. What are some of the advantages to renting instead of owning? • Lower monthly and annual bills. • No property tax • No Maintenance • No transactional costs
2. For buying a home to be a better deal, how long do you need to live in that house? • According to the article, you have to stay in the house you purchased for at least 8 years.
3. What happens to housing prices when there is a "mania toward homeownership." • When there are more buyers than sellers, it drives prices up.
4. What are the main advantages to owning a house? • The money you pay towards your mortgage you will get back when you sell it. • “its yours.”
5. List 3 downfalls of owning a house. • Maintenance costs • Housing prices could drop • It can be more expensive
Opportunity Cost • The value of your second best alternativeor what you refuse. • Example– When Mr. Cochran sleeps in an extra 10 minutes, he is giving up shaving. • Example—When you buy a sub from Shaheens, your opportunity cost was a value meal at McDonald’s.
Comparative Advantage • The ability to produce a good or service at a lower opportunity cost than another producer.
Law of comparative advantage: • Every nation has a production activity with a lower opportunity cost than another nation. • Trade between the two nations can be beneficial to both if each specializes in the production of a good with lower relative opportunity cost.
Law of comparative advantage: • While this law is fundamental to the study of international trade, it also applies to other activities, especially the specialization and the division of labor.
Absolute Advantage • The ability to produce more units of a good or service than some other producer, using the same quantity of resources.
3. From this example, we can see that LeBron James is better than Scotty at mowing grass. Would LeBron benefit from a trade?
Analysis • We should specialize in what we're good at producing and trade with others for things we want. • Examples?
Analysis • Such a rule explains why: • 1. Unless you are a farmer, you generally don't grow our own food. • 2. USA does not produce clothing in large numbers. • 3. Basketball or football players often specialize in one position as opposed to playing all of them. • 4. Your teacher may teach economics, history, and government but likely does not also teach physical education and chemistry.
2. If Country A is better than Country B at producing everything, would Country A gain anything by trading with Country B?
3. When a new home is built, why doesn't one contractor do everything: carpentry, electrical, plumbing and landscaping?
BRAINSTORM • 1. What are some goods and services in which the United States likely has a comparative advantage.